El Al: Alliance 'Cartels' May Drive Us Out of Business
In light of its canceling a direct route from Tel Aviv to Sao Paolo, Brazil, El Al has filed a complaint with the Israel Antitrust Authority accusing foreign carriers of price-fixing – a situation that could eventually lead to the demise of the company altogether, El Al said.
The “Open Skies” policy adopted by Israel to increase competition among airlines serving Israeli is not as open as it could – or should – be, El Al said in its complaint. Foreign carriers that have partnership agreements on long-haul routes engage in a form of price-fixing, setting prices on routes that a company like El Al cannot compete with. The carriers in question are members of an agreement called “A++,” and include heavyweights like Continental-United, Lufthansa, Air Canada, Swiss, Austrian Airlines, and BMI.
These carriers are supposed to be competing with each other, but instead, because of the agreement, passengers can choose various combinations of flights, all more or less the same price. For example, the airline said, passengers traveling to San Francisco can fly one of the carriers to Frankfurt, New York, or Toronto, and from there fly on another carrier in the alliance to San Francisco. Because of the alliance, the “mix and match” system works to the benefit of not only passengers, but the airlines.
Since El Al is not a member of a global alliance, it cannot offer this kind of service on trans-atlantic routes – so that an El Al passenger to San Francisco has to make two separate bookings, one to an El AL destination and then on a second flight to their final destination, with more hassle and higher prices. It was this competition that drove El Al off the Brazil route two and a half years after it was stated, the company told the Authority.
The El Al complaint includes testimony from the Travel Agents Federation, which said that “international travel today increasingly revolves around a small number of alliances that have divided routes among themselves, not including routes to and from Israel, and the Israeli consumer is losing out because of the price-fixing the alliances can engage in.” At a recent travel agents' conference, Yossi Patael, chairman of the Federation, said that at least one third of Israeli air traffic to and from Europe was “controlled” by the Star Alliance, another global carrier agreement group.
An El Al official told the Authority that if the situation continues, the airline would be out of business. “We will be unable to survive in the face of these cartels, without membership in one of them,” the official said. The Authority said that the complaint had been received, and would be investigated.